Buyers Rejected for Loans Can Now Find Out Why

A provision in the Dodd-Frank financial reform law, which took effect this week, is requiring lenders to provide consumers with a free credit score, which will help provide new insights into why they may have been rejected for a loan or did not qualify for the best, lowest rate.

While borrowers can access their credit scores from the credit bureaus, the credit score that a lender uses isn’t always the same one that the credit bureau provides you. According to a report by the Consumer Financial Protection Bureau, some credit bureaus sell consumers “educational” scores that aren’t the same ones used by lenders, or these bureaus may base the score on a different model than the one lenders use.

Now, borrowers for the first time will get a more accurate view of what credit score lenders are using to base their mortgage on.

Under the new provision, lenders will be required to provide potential borrowers with a free credit score whenever they reject an application for a loan. Lenders must provide borrowers with an “adverse action” notice, which will include their credit scores as well as an explanation of why they were rejected for a loan.

Lenders will also be required to provide a free credit score and an explanation whenever they approve a loan but at a higher rate than what is given to their best customers.

Mark Greene, CEO of FICO, says that many borrowers may be surprised to learn that they didn’t qualify for a lender’s lowest rate when applying for a loan.

Source: “Turned Down for a Loan? Now You Can Find Out Why; Consumers Can Also Get Free Credit Scores if Loan Rate Isn’t Best Available,” USA Today (July 21, 2011); Daily Real Estate News; Blog distribution provided by Kenneth Bargers and Bargers Solutions, a proud member of Pilkerton Realtors, residential real estate services located in Nashville, Tennessee

Market Comment for Week of July 18, 2011…

MARKET COMMENT  Mortgage bond prices rose last week, which helped mortgage interest rates improve. Rates started off on a good note Monday as European debt worries reignited. Italy made headlines as the next country mired in debt concerns. The Treasury auctions showed decent foreign demand. The financial markets experienced some volatility mid week following comments by Fed Chairman Bernanke, which indicated additional stimulus might be needed to boost the economy. We saw some negative movements Friday morning following higher than expected core inflation on the consumer side. Mortgage bonds ended the week better by about 5/8 of a discount point.

The Treasury will auction 10Y TIPS on Thursday. If foreign demand falters rates may come under pressure.

LOOKING AHEAD

• Housing Starts; July 19; Consensus Estimate 510k; Important. A measure of housing sector strength. Weakness may lead to lower rates.
• Existing Home Sales; July 20; Consensus Estimate 4.8m; Low importance. An indication of mortgage credit demand. A significant decrease may lead to lower rates.
• Weekly Jobless Claims; July 21; Consensus Estimate 403k; Important. An indication of employment. Higher claims may result in lower rates.
• Philadelphia Fed Survey; July 21; Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates.
• Leading Economic Indicators; July 21; Consensus Estimate Up 0.4%; Important. An indication of future economic activity. A smaller increase may lead to lower rates.
• 10-year TIPS Auction; July 21; Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.

HOUSING STARTS  Housing starts data is a leading indicator of the state of our economy. This report, provided by the Bureau of the Census, takes into account data from both single-family homes and multi-family dwellings. Building permits are also released with the housing starts data. By knowing the number of permits issued monthly, analysts can attempt to estimate for the upcoming months. Normally, starts are 10% higher than permits since all locations are not required to have a building permit.

Housing starts and permits give a warning of future economic activity. In effect, a rise in housing starts can lead to a fall in the bond market and vice versa. Consumers tend to hold off on the purchase of new homes, new cars, and other big-ticket items if they are worried about the future of the economy. Housing is an important part of our economy. Continued declines in housing starts can lead to continued economic slowdown and essentially a deeper recession. On the other hand, increases in housing starts could signal a possible reversal.

From the opposite perspective, changes in interest rates often lead to changes in housing starts. High interest rates can cause a significant decline in home sales, which can lead to a drop in housing starts. Just the opposite happens when rates drop and is one of the additional reasons the Fed is trying to keep rates low. Low mortgage rates affect both home sales and housing starts.

The housing market is a vital component in sustaining the economy. The continued weakness of the housing market has many worried. Many economists believe housing will continue to suffer.

There is still uncertainty regarding the future state of the economy. Interest rates are historically low. A cautious approach is wise to protect against future volatility.

Source: Todd Kabel, F&M Mortgage; Blog distribution provided by Kenneth Bargers and Bargers Solutions, a proud member of Pilkerton Realtors, residential real estate services located in Nashville, Tennessee

Single Women a Rising Force in the Housing Market

Unmarried women continue to make up a growing segment of home buyers and are buying homes in record numbers: Last year, they composed 20 percent of all buyers last year, according to the National Association of REALTORS®. Single men accounted for 12 percent.

The JointCenter for Housing Studies says the three main reasons single women are purchasing homes are:

  • They have a strong desire to nest (the top-ranked reason).
  • They want to relocate closer to a job or family.
  • They need more space.

In capturing this growing segment of female buyers, builders are reflecting more female tastes in the design of homes. For example, in new houses, builders are adding security features, gourmet kitchens, and maintenance-free yards to appeal more to the single woman buyer.

Housing experts say that single women are purchasing homes at various stages in their lives — some are new college grads and plan to one day get married while others may be divorced or just want to set up roots in their own place.

Source: “Singles Dive Into the Real Estate Market,” SecondAct/MSN (July 12, 2011); Realtor Magazine; Blog distribution provided by Kenneth Bargers and Bargers Solutions, a proud member of Pilkerton Realtors, residential real estate services located in Nashville, Tennessee

Nashville Ranks One of the Best Places for Business 2011

To find cities with the most jobs and lower costs of doing business, you’ll have to venture to the heartland, according to Forbes’ 13th annual Best Places of Business list. Eighty percent of the top 25 regions on Forbes’ list this year are from the center of the United States.

Forbes’ rankings evaluate 200 metro areas, factoring in job growth (past and projected), costs (business and living), income growth, projected economic growth, and educational attainment.

Demographer Bert Sperling says the heartland’s success is largely due to its “extractive industries,” such as oil, gas, and mining and record-high crop prices that have added jobs.

“These economies run in cycles, and these booms and busts are often decades in the making,” Sterling says.

Many of the cities topping the list also boast at least one strong university and strong entrepreneurial activity.

Here are the top six cities to make Forbes’ list:

Raleigh, North Carolina
Des Moines, Iowa
Provo, Utah
Lexington, Kentucky
Fort Collins, Colorado
Nashville, Tennessee

Source: “Raleigh Tops Forbes’ Best Places for Business 2011,” Forbes.com (July 11, 2011); Realtor Magazine; Blog distribution provided by Kenneth Bargers and Bargers Solutions, a proud member of Pilkerton Realtors, residential real estate services located in Nashville, Tennessee